Consumer Watchdog Makes it Easier to Sue Banks

The Consumer Financial Protection Bureau announced a new rule Monday that makes it easier for groups of consumers to band together to form and join class-action lawsuits. Companies under the bureau’s jurisdiction will no longer be able to strike down class-action suits and force them into arbitration.

CFPB director Richard Cordray announced that rights of groups of consumers to a day in court is “a cherished tenet of our justice system” and “that no one, no matter how big or how powerful, should escape accountability if they break the law.” In a 728-page study of arbitration in 2015, the CFPB found that group lawsuits were frequently cut down.

The rule will apply to financial services providers under the CFPB’s jurisdiction, which includes companies that lend, store, move, or exchange money. (Most bank and credit card account contracts include arbitration clauses, which limit your recourse if you have a legal issue with the company.)

Arbitration has become very popular with companies looking to avoid lawsuits

In the past decade, companies have curbed many lawsuits with mandatory arbitration clauses that prevent consumers from going to court, bound instead to the arbitration process. After its scandal in which it created up to 2 million fraudulent accounts, Wells Fargo (WFC) asked a Federal District Court to order customers to private arbitration instead of the class-action suit they were pursuing. Thanks to public pressure, however, the bank settled.